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What should My Restaurant ‘s Operating Costs be?

Nov 5, 2018
Article #393
Author: Mel Jones

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There is a never-ending debate about what percentages should a food business maintain in order to be profitable.  With the added pressure of government-enforced minimum wages, more regulations and taxes, the restaurant business is getting tougher each year to squeak-out a profit. 

Finding industry standards is easy to do, just Google them and you’ll find a horde of opinions but no real back-up from real operating restaurants and bars.   But this article isn’t about quoting other opinions or statistics; rather it is about presenting the reader with actual results from dozens of restaurants.

As a restaurant broker, I review hundreds of restaurant and bar financials each year.  I see first hand how restaurants perform.  Of course this isn't a scientific analysis or study; rather it’s a compilation of real restaurant owners who have come to me to review and value their business.  The names of the restaurants of course are confidential. 

 As a note, the industry is notorious for not reporting all the revenues, but certainly reporting all the costs plus more. So these percentages are likely overstated.  In other words, if an owner reports 90% of his or her sales, then the percentage are higher than reality.  For example, if actual sales are $100 and reported sales are $90 and food costs are $30, then the reported cost of sales percentage is 33.3% while the real cost of sales is 30%.

These percentages represent one working owner, meaning there is one owner working in the restaurant and no other family members. These numbers are from tax returns and reported to the IRS.

Restaurant Type

Food

Labor

Rent

Prime Costs

21+ Bar

27.9%

25.8%

10.2%

53.7%

American Comfort

29.4%

37.5%

9.6%

66.9%

American Comfort Food

37.3%

16.7%

2.5%

54.0%

BBQ

47.8%

17.6%

10.9%

65.4%

BBQ

35.0%

17.3%

8.5%

52.3%

Breakfast/Lunch Diner

33.3%

32.9%

9.9%

66.2%

Casual Full Service

25.1%

26.9%

8.0%

52.0%

Family American

30.5%

28.4%

4.9%

58.9%

Fast Casual Italian Pizza & Pasta

31.2%

36.2%

2.3%

67.4%

Fine Dining American

37.3%

35.4%

3.8%

72.7%

Fine Dining American

31.2%

33.8%

9.1%

65.0%

Fine Dining American

27.4%

19.0%

3.3%

46.4%

Fine Dining French

25.1%

30.4%

4.8%

55.5%

Fine Dining Italian

25.1%

19.4%

8.7%

44.5%

Fine Dining Spanish

26.6%

31.7%

6.7%

58.3%

Fine Dining Spanish

43.0%

10.2%

5.5%

53.2%

Fine Dining Spanish

49.3%

25.0%

3.0%

74.3%

Fine Dining Mexican

18.9%

35.0%

9.3%

53.9%

Franchise Bakery

25.1%

34.8%

11.4%

59.9%

Franchise Burger Dining

31.2%

24.4%

10.7%

55.6%

Franchise Pizza

31.6%

24.6%

2.9%

56.2%

Franchise Pizza

30.8%

13.0%

2.9%

43.8%

Pizza Restaurant

26.4%

28.1%

4.4%

54.5%

Pizza Restaurant

35.6%

22.3%

13.6%

57.9%

Pizza & Pasta

27.8%

27.1%

8.4%

54.9%

Franchise Sub Shop

34.3%

15.6%

13.0%

49.9%

Full Service Traditional Mexican

25.2%

39.2%

7.8%

64.4%

Full Sevice Restaurant & Bar

34.5%

17.3%

9.3%

51.8%

Large Sports Bar

30.2%

23.0%

14.4%

53.2%

Latino Quick Serve

20.8%

33.0%

12.7%

53.8%

Office Complex Cafe

34.4%

23.4%

10.4%

57.8%

Quick Serve Upscale Burgers

26.2%

28.7%

13.1%

54.9%

Restaurant & Lounge

29.0%

30.9%

9.2%

59.9%

Restaurant & Sports Bar

31.6%

38.6%

6.8%

70.2%

Sports Bar

30.1%

16.1%

12.0%

46.2%

Sports Bar

30.6%

26.0%

6.6%

56.6%

Sports Bar

29.8%

18.0%

9.2%

47.8%

Sports Bar & Restaurants

34.9%

33.3%

10.3%

68.2%

Sports Bar and Restaurant

30.5%

34.1%

14.7%

64.6%

Steakhouse High-End

30.6%

27.2%

10.8%

57.8%

Sub - Salads - Pasta

26.0%

34.7%

5.2%

60.7%

Upscale American Bar

28.3%

32.9%

3.5%

61.2%

Upscale Asian Fish

29.0%

33.6%

6.4%

62.6%

Upscale Cal-Italian

31.5%

26.0%

6.1%

57.5%

Upscale Casual Dining

26.9%

23.5%

6.0%

50.4%

Upscale Italian

28.7%

37.7%

5.5%

66.4%

Upscale Italian

32.4%

22.0%

8.3%

54.4%

Upscale Mexican

27.7%

36.7%

7.2%

64.4%

Are you interest in getting your restaurant valued?  Or perhaps you're thinking of selling?  SellingRestaurants is a professional restaurant brokerage firm helping hundreds of people each year sell their restaurant across the United States. Give me a call at 800.576.3615 and let's talk!

Mel Jones

CEO & President

Paramount Restaurant Brokers, Inc. 

                                                                                                                                                                                                                                                     

Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attended Law School at Gonzaga University.  He is a volunteer coach at Westlake High School track and field specializing in shot put and discus. 

 


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